KEY POINTS:
The Government's about-face on Kiwisaver is bizarre to say the least.
Last Thursday, Parliament passed an amendment to the legislation essentially preventing employers from paying employer contributions as part of employees' total remuneration packages (as opposed to paying them on top).
This does not have retrospective effect, meaning it only catches agreements to deduct employer contributions taking effect after 2 September.
I can understand the underlying reason for this change, in that without it, employees could end up paying both employee and employer contributions. Given that there is a tax credit of up to $20 per week allowing employers to recover a substantial part of the cost of their contributions, the Engineering, Printing and Manufacturing Union may have had a fair point in arguing that the pre-existing law was unfair to employees.
However, that's not the point. The Government made a considered decision to allow employers to pay their contributions as part of employees' packages. This still required employees' agreement, and many employers were looking at offering compensatory arrangements such as one-off payments.
A further point made by the Employers and Manufacturers' Association is that under 18s are not entitled to employer contributions, and the over-65s are not entitled to join Kiwisaver. The "total remuneration" approach that has just been outlawed would have enabled employers to avoid disadvantaging these age groups by ensuring that other age groups did not get employer contributions on top of their regular pay. It also meant that employees who choose not to join Kiwisaver are not paid less than their colleagues who do join.
What caused Trevor Mallard to change his mind? It appears that back in April, when the media got hold of a couple of cases of, guess what, employers doing exactly what the Government had permitted them to do, it occurred to him that this might not be viewed too favourably in some quarters.
Either that, or he was given the message from above that it simply wasn't a good look.Whether he hadn't thought through the implications fully, or somebody else hadn't, it shouldn't have got to this point. Because it did, we were faced with the unedifying spectacle of the Government tacking a late supplementary order paper onto another piece of legislation, which was going back to Parliament for its third reading after being examined by a select committee. Translation: no real debate or opportunity for Parliament to consider the impact of the change.
Hardly the stuff that properly functioning democracies are made of.
Greg Cain
Greg Cain is an employment lawyer at Minter Ellison Rudd Watts.
